Economics, PC sales and inventory weaken the outlook of the semiconductor industry

*Economics, PC sales, stocks under pressure on wafer stocks* Investors' reaction to Intel's outlook is indifferent * Semiconductor stocks underperformed the market. San Francisco, July 18th Reuters--Suspension of economic and personal computer (PC) sales delays The outlook for other chipmakers such as Intel (INTC.O: Quote) in the second half of the year is overcast, and these companies are planning to announce earnings this week.

The high unemployment rate in the United States and the risk of the European financial crisis are hurting the demand for consumer electronics products. Some investors worry that the high inventory of wafers may cause new orders to slow down later in 2011.

These doubts made the summer stocks that semiconductor stocks suffered around the middle of the year more serious. The demand for wafers will decline at this time. After that, it will only return to the school tide and the demand for holidays will rise again.

The Philadelphia Semiconductor Index has fallen by 15% since the end of April, a drop of more than 4% from the Dow Jones Industrial Average.

Some investors believe that the high unemployment rate in the United States and the appetite for the Apple iPad 2 are favored and are curbing the demand for consumer notebooks. PC chip leader Intel and such investors are in a period of lukewarm.

Just a quarter ago, Intel’s profitability exceeded expectations, and said that it expects that global PC sales will grow at a “double-digit low-end” rate in 2011, much higher than market expectations. It said independent agency forecasts have not PCs produced by small manufacturers in China and other emerging markets are counted.

However, investors are still full of suspicion that Intel will have to cut its PC growth outlook by about half, even if there is no downgrade when the earnings report is released on Wednesday, and an announcement will be made later this year. The current expected price-to-earnings ratio (P/E) of Intel's stock price is only nine times.

Intel usually estimates its next quarter and full year revenue when it announces its quarterly earnings.

"Even if they finally meet that optimistic forecast, the market still doesn't believe it," said Doug Freedman, analyst at Gleacher & Company. "Everyone said that it is only a matter of time before Intel's decision to drop money, so they have to wait until the expectations are very low to buy this stock."

According to Thomson Reuters I/B/E/S, Intel’s revenue for the quarter in the quarter grew by about 5% compared with the second quarter – which is lower than the normal growth rate of 8% saved each year.

"This number may be too high," said Hampton Adams, portfolio manager at Jones Investment Counsel. "A lot of demand in the near future is biased towards tablet PCs and wireless devices, which hurts PC demand."

**Reduced doubts from Japan**

Dutch chip equipment manufacturer ASML Holding (ASML.AS) warned last week that economic difficulties are hurting demand for PCs and smart (smart) phones, highlighting the concerns of the tech industry. The company and other equipment manufacturers said that their foundry and memory customers are rethinking plans to expand production and order new equipment.

Since the March earthquake and tsunami in Japan, electronics manufacturers have been storing spare parts for fear of supply shortages. However, manufacturers are now less worried about Japan-related supply shortages. On the contrary, they are concerned about the high unemployment rate in the United States and the European financial crisis. In this case, high inventory becomes a worrying issue and purchasing managers may reduce the order of new wafers.

Although some analysts are cautious about risks in the economy, they said that given the recent recovery and strong growth of the semiconductor industry after a severe recession, the relatively high inventory of many types of chips is not a source of great concern.

“In the past decade, the technology industry has been in the off-season every summer, and people always like to sprinkle salt on this seasonal wound,” said Alex Gauna, an analyst at JMP Securities.

"These macro problems do exist, but as long as secular drivers exist, there are tablet computers, smart phones, cloud computing, broadband requirements, etc. as far as demand is concerned. I think it is absolutely helpful," he said.

Investors this week will pay attention to the semiconductor industry's financial report on inventory and economic views, these vendors include Altera (ALTR. O: Quotes), Xilinx (XLNX. O: quotes), Freescale Semiconductor Holdings (FSL. N: quotes), SanDisk (SNDK.O: Quote) and Intel's rival Advanced Micro Devices (AMD.N: Quotes).

Investors are more optimistic about Qualcomm (QCOM.O: Quotes), which published financial reports at the same time as Intel. Gao Tong will obtain new iPhone orders from Apple (AAPL.O).